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What Does Velcade Patent Challenge Mean For Celgene, Watson?

 January 02, 2013 01:11 PM

(By Mani) Watson Pharmaceuticals, Inc. confirmed that it had filed for approval of a generic version of Velcade, which is used to treat cancer, or multiple myeloma. Velcade is made by Takeda Pharmaceutical Co., which got the product as part of its $9 billion acquisition of Millennium Pharmaceuticals in 2008.

Velcade, which generated sales of $740 million in the 12 months ended October, is the primary competitor to Celgene's (NASDAQ: CELG) Revlimid and Onyx Pharmaceuticals, Inc.'s (NASDAQ: ONXX) Kyprolis.

[Related -Celgene Corporation (NASDAQ:CELG): Why Should You Invest In Celgene In 2014?]

"For CELG we do suspect guidance in January will encapsulate consensus or come in higher than estimates for 2013 and could be a short-term catalyst on recent pullback. The key for 2013 is still MM-020 results later in Q1, which we think is 65–75% likely positive and 25–35% risky (we've written on this at length in prior notes)," RBC Capital Markets analyst Michael Yee said in a client note.

New Jersey-based Celgene is biopharmaceutical company focused primarily on the hematology/oncology markets. Its three key products are Revlimid, Thalomid, and Vidaza. From its early focus on chiral chemistry, Celgene also now receives royalties on Focalin, an attention deficit disorder drug marketed by Novartis.

The application prompted Takeda/Millennium to sue to prevent generic entry and initiate a 30-month stay that would end in mid 2015. Drug companies generally sue generic manufacturers to challenge their patents so that they can get a protection period of up to 30 months from the date of the generic drugmaker's filing for approval of its own drug.

[Related -Celgene Corporation (CELG): How Q3 Earnings Will Fare?]

Moreover, maintaining patent protection and pricing is important to the overall strong $6 billion plus branded myeloma market.

"While these are risks to follow through the courts, these are not surprising at all considering it makes absolute sense for generic companies to file on huge blockbuster small molecule drugs like these and we and Street have been expecting these," Yee said.

Meanwhile, consensus expectation is that Velcade should be protected through 2017 with a composition of matter patent and possibly to 2022 with formulation patents. Consensus for Revlimid is at least 2019 and at least 65 percent likelihood of polymorph patents protecting it through beyond 2026.

NatCo/Watson are also in the 30-month stay over its filing on Revlimid and claims construction process may begin early 2013 and Markman hearings may begin in July 2013 and may be watched by investors during 2013.

According to the court documents filed on December 21, Watson is challenging the validity of Velcade's two formulation patents, 6,713,446 and 6,958,319 (formulations using lyophilized forms of boronic acid and/or with a pharmaceutical composition), which were issued in 2004–2005 and both set to expire in January 2022. These two patents are critical to extending the Velcade franchise.

"We note this is not the first time these two patents have been challenged, as Teva had filed an Abbreviated New Drug Application (ANDA) in late 2008 and Sandoz very recently in August 2012 (also sued by Takeda and now in the 30-month stay)," Yee noted.

However, in the FDA's most recent Paragraph IV document, it notes that the earlier ANDA filed by Teva has been withdrawn. This may suggest challenging the two patents may not be that easy although this is offset by now two filers who have been sued, suggesting they are willing to challenge (or settle).



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